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Consumption Tax

November 22nd, 2014 2 comments

If one counts out the recessions caused by U.S. economic concerns in 2001 and 2008, then it is noteworthy that 2 of the last three recessions in Japan—including the current one—have closely followed increases in the consumption tax.

It should also be noted that the initial consumption tax was accompanied by a lowering of taxes targeted at the upper end of the economic spectrum, and that in Japan, consumption tax has no exemptions for food or other necessities for lower-income people. Japan’s consumption tax just happens to remove large amounts of income just where it is needed most—not just out of personal needs, but out of the need for disposable income to fuel purchasing and therefore production.

If Japanese politicians want to raise the consumption tax yet again to 10%, as is currently planned, I think they would be well-served by doing so only after a 3-year experiment in which the tax is brought back down to 3% and original higher-end taxes reinstated. If the economy is doing worse after those three years (and not depressed by the world economy), then they can try a 10% consumption tax.

Not that that’s going to happen.

Categories: Economics, Taxes Tags:

The Resentful Rich

March 5th, 2013 2 comments

From an article in the AP’s “Big Story”:

For 2013, families with incomes in the top 20 percent of the nation will pay an average of 27.2 percent of their income in federal taxes, according to projections by the Tax Policy Center, a research organization based in Washington. The top 1 percent of households, those with incomes averaging $1.4 million, will pay an average of 35.5 percent.

Those tax rates, which include income, payroll, corporate and estate taxes, are among the highest since 1979.

The average family in the bottom 20 percent of households won’t pay any federal taxes. Instead, many families in this group will get payments from the federal government by claiming more in credits than they owe in taxes, including payroll taxes. That will give them a negative tax rate.

“My sense is that high-income people feel abused by being targeted always for more taxes,” Roberton Williams, a fellow at the Tax Policy Center, said. “You can understand why they feel that way.”

No, actually, I can’t. It’s more an issue of why these people don’t understand how well-off they are. If they want to gripe about how good the bottom 20% have it, then they should offer someone from the bottom 20% to switch places.

No? Then quit whining and shut the frack up.

The top 20% make a minimum of $92,000 a year with a marginal tax rate on their highest dollar ranging from 28% ($87,851 to $183,250) to 39.6% ($400,001 and up), meaning that with deductions, they probably don’t even enter that bracket at all. People throughout the top 20% often pay an effective rate of no more than 20%. Plus, they often get benefits like health insurance which is not reported as income.

And the bottom 20%? A shmoe breaking his back working 50 hours a week all year round, no vacation time at all, at minimum wage, will earn $18,850—putting him just barely above the top of the bottom 20%, which earns at most $18,500 a year. Give the guy one week off a year (the lazy moocher!) and he is right at about the top of the bottom-20% heap.

Now, if you can get by on that much, especially with a family to feed, and pay for minimal health care, and claim you still deserve to pay federal income taxes on top of your social security tax, Medicare tax, sales tax, state and local taxes, and all the other taxes you have… then congratulations, you’re Mother Freakin’ Theresa.

The article is slanted and just wrong in several places. Aside from the obvious falsehood of quoting marginal rates rather than effective rates, it makes the old and tired “the poor pay no federal taxes” error (the bottom 20% pay around an average 2% effective rate on federal taxes, mostly payroll), and ignores local taxes, especially the most regressive tax, the sales tax. The “many” families who get more credits than taxes are not enumerated or specified (nor are the special breaks for the top 20%, for the same reason—it would go against the false argument being made), and the “average” family in the bottom 20% makes almost no money at all, so forgive the destitute for getting food stamps so their children only starve just so much. Not to mention the fact that the article fails to mention that the wealthy in America enjoy lower tax rates than about two-thirds of industrialized countries. Sure, taxes in Korea, Belgium, and New Zealand are a bit better, but try living in France, Germany, or Belgium where personal tax rates hover around 50% and sales/VAT taxes can be as high as 20%.

And then consider that even our bottom 20% looks pretty damn good to the majority of people living in the world—who probably spend way less time whining about their lot in life than our top 20% do. When Sachi and I get big tax bills to pay, that’s how we see it: we’re way better off than most people are in the world, and we’re grateful to be there.

So if you’re in the top 20%: stop being a selfish goddamn crybaby, pay your damn share, and be grateful you have it so well.

Categories: Taxes Tags:

The Rich Don’t Have Enough?

January 11th, 2013 1 comment

Great article in Common Dreams about taxes. It’s not about raising taxes, but rather collecting the taxes that are already in place.

Every year, this is how much could be collected were it not for special exemptions and other avoidance techniques, used primarily by the rich:

  • $1.25 Trillion: special deductions, exemptions, exclusions, credits, capital gains, and loopholes;
  • $450 billion: the 17% of taxes being under-reported and/or unpaid;
  • $250 billion: money hidden in tax havens by people like Mitt Romney;
  • $250 billion: corporate tax avoidance has cut their payments from 22.5% to 10%;
  • $300 billion: getting rid of the cap on payroll taxes.

The article adds $100 billion lost if the estate tax is repealed, but since it has not been repealed, I do not include this.

The total comes to $2.5 trillion a year, more than double the current deficit.

It would be sheer idiocy to suggest that somehow these exemptions pay for themselves by more than a small fraction.

True, some of this is distasteful and some not feasible; we could not magically collect all unreported taxes, and many of the deductions are badly needed by the middle class.

However, even if only half of these were achieved, collecting what could be realistically found and ending special exemptions mostly for the rich would instantly eliminate the deficit, and even give us a start on paying down the debt.

Not that it will ever happen, of course. We do, after all, have to pay respect and homage to the insanely ludicrous fantasy that making rich people pay taxes will stop them from trying to make money. Sadly, that theory is so deeply ingrained that the recent Republican presidential candidate actually campaigned on cutting tax rates for rich people nearly to zero. He wanted to slash corporate taxes, have no taxes on capital gains at all, and eliminate the estate tax. And nearly half the country voted for him.

Categories: Taxes Tags:

The Party of the Lottery Winner

December 5th, 2012 1 comment

Jindal and others in the GOP are awakening to a new concept:

Jindal said the Republican Party needs to convince voters it is the party of the middle class and upward mobility.

You know what would be a good way to start? By not refusing to give the middle class an extension on their tax cuts unless the rich get one too.

And while you’re at it, stop trying to dismantle programs the middle class depends upon; Social Security and Medicare are not just for poor people.

Stop attacking institutions like education and unions which helped make the middle class.

Stop endorsing policies that scream, “We’re trying to increase income inequality.”

Stop favoring banks and financial institutions over the middle class.

Stop… aw, hell. You can see where this is going. The GOP would more or less have to dismantle its entire policy structure in order to be the party of the middle class.

Instead, they will likely do what they have always done: push policies that hurt the middle class while insisting that they are “the party of the middle class.”

The problem is, lying like that requires that you not delude yourself, else your lies become transparently ludicrous. That’s hard when you think like this:

“We’ve got to be the party of the middle class. I don’t know why we’ve essentially ceded that ground to the Democrats,” said strategist Matt Mackowiak. “We don’t believe our policies only help rich people. We believe our policies help people become rich.”

“We believe our policies help people become rich”? What happened to “We built that”? I thought their entire point was that government can’t do squat to help people.

At best, what this kind of person is saying is, if you are in the middle class, and you decide to start a business (most don’t), and, without our help, that business succeeds (most don’t), and then it becomes so successful that you become rich (most don’t)… then we’re on your side, and we’ll cut you special tax breaks and help you stay rich.

As for the rest of you middle-class people, the people who try to open businesses but who either fail or just do OK… and most significantly, to the majority of people in the middle class who simply work hard and expect to stay afloat in at least modest comfort… well, you can all go screw yourselves. We’re seeing after the people who can make something of themselves. They deserve our help; you don’t.

I wonder why that’s not working better?

The sad thing is, it’s working a lot better than it should. America has too much of a “lottery winner” mentality.

Categories: Right-Wing Extremism, Taxes Tags:

Republicans’ Love for the Wealthy Has No Bounds

December 4th, 2012 2 comments

Wow. Talk about obstinate:

House GOP leaders endorsed a debt-reduction plan Monday that would raise tax collections by $800 billion over the next decade, but they refused to budge on higher tax rates for the wealthy, the central issue dividing Republicans and Democrats.

The Republicans’ “middle ground” plan? They agree not to slash taxes for the rich yet again, they agree to go forward with their own nebulous and undefined plan to somehow cut deductions as a way of “taxing” wealthy people, and in exchange, Democrats must agree to $600 billion in cuts to health programs and hiking the eligibility age for Medicare from 67 to 69.

That’s a “middle ground”? “Give us most of what we want anyway”? With this plan, the Democrats get nothing they ask for, and the Republicans get mostly stuff they campaigned on.

They lose a major election that they should have won by wide margins primarily because of the issue of income inequality. The general public widely supports the new tax on income over $250,000, and hates the idea of health care cuts. The president is re-elected despite high unemployment rates and a struggling economy mostly on the strength of this issue, which also leads Republicans to lose the popular vote in all areas, maintaining the House only by gerrymandering.

And still, they think it’s a good idea to crash the economy instead of raising taxes on the wealthy by a measly few percent.

Holy crap.

I can only figure that they plan to run down the clock, hoping the Democrats will blink. However, Obama, usually the first to compromise, is actually standing firm on this one.

I am hopeful of the eventual outcome—I believe that Republicans will hold out until just before the end, that Obama will stand firm, and at the last minute the GOP will cave, at least mostly.

The problem is, this game they’re playing will likely damage the nation’s economic standing, just like it did last time.

Categories: Right-Wing Extremism, Taxes Tags:

Romney’s Tax Lie

October 18th, 2012 3 comments

People are now coming away with the impression that Romney is vowing not to cut taxes for the wealthy, and instead focus only on middle-class tax cuts. In fact, many people now are convinced that Romney wants to not only leave the base tax levels for rich people unchanged, but to get rid of all or almost all of their deductions and loopholes. The impression is that he’ll actually make wealthy people pay more in taxes!

In reality, this is a very similar con game to the one Bush played in 2000; make it sound like the tax cuts are aimed at the common man, then shovel the lion’s share to the rich. The difference is that Romney is being even more dishonest than Bush was.

The fact is that Romney has not changed his tax plan one bit. He still plans to cut taxes 20%, or one-fifth, across the board, which is a far bigger and better deal for rich people whose income may still fall under the highest marginal tax rate. In addition, he would eliminate capital gains taxes (a major source of income for rich people cut to zero), eliminate the millionaires- and billionaires-only estate tax, and slash corporate tax rates by almost 30%. And, oh yeah, he would scale back tax increases on wealthy people contained in the ACA, and would extend both of the Bush tax cuts which mostly favor the wealthy. More good news for rich people.

In other words, he will not only cut taxes for rich people, he will cut taxes mostly for rich people. The vast majority of savings go to millionaires and billionaires.

For more details on how Romney’s tax plan will be massively slanted to favor rich people, see the analysis below the rule. But for right now, I want to address how it is that Romney is making people think he’ll somehow raise taxes on wealthy people, when the exact opposite is true.

In short, he’s playing with language. Pay close attention to the exact wording, and keep in mind that each statement is made within a context which is almost certainly different than what you think it is.

Here he is at the first debate:

My view is that we ought to provide tax relief to people in the middle class. But I’m not going to reduce the share of taxes paid by high- income people. High-income people are doing just fine in this economy. They’ll do fine whether you’re president or I am. … I will not reduce the share paid by high-income individuals.

And at the second debate:

Now, how about deductions? ‘Cause I’m going to bring rates down across the board for everybody, but I’m going to limit deductions and exemptions and credits, particularly for people at the high end, because I am not going to have people at the high end pay less than they’re paying now.

The top 5 percent of taxpayers will continue to pay 60 percent of the income tax the nation collects. So that’ll stay the same.

Middle-income people are going to get a tax break.

… And I will not — I will not under any circumstances, reduce the share that’s being paid by the highest income taxpayers. And I will not, under any circumstances increase taxes on the middle-class.

Emphasis on the word “share” is mine. And for a reason.

He’s not saying that he will not lower taxes for the rich; he’s saying that he won’t reduce the share of taxes they pay. And in that, he is only referring to the “shares” in the context of the 20% across-the-board cut. That statement does not include the capital gains and estate tax eliminations, nor does it count the tax cuts for wealthy people gained by eliminating the ACA, nor does it count the money they will gain through the corporate tax cuts.

Get it? Everyone gets their share cut by 20%, so no one’s share is cut less than anyone else’s. The 60% thing? A fake measurement which can be jiggered to mean whatever you want it to mean, and even at that, is still probably an outright lie based on assumptions which will absolutely not be true under his tax plan.

But wait—Romney clearly said, “I am not going to have people at the high end pay less than they’re paying now.”

Listen carefully—he said that in the context of deductions. And true enough, he has said he’ll cut deductions, but that won’t matter because the deductions rich people lose will be dwarfed by the other tax cuts Romney is giving them. So they will be paying a lot less than now… but not because of deductions!

What Romney is saying is very carefully phrased, so he can make many statements which sound like he’s only cutting taxes for the middle class and is not cutting anything for the rich—when in fact, the exact opposite is true.

This is what you can call “masterful deception.” People are buying it. And the media, for the most part, is not calling him on it.


Now, how about the details of Romney’s tax plan? How will this be a “fair” cut where no one pays any less a “share” than anyone else?

Income over $388,350 is taxed at 35%; Romney would cut that by one-fifth to 28%, a 7% cut.

However, if you make less than $35,350, your one-fifth reduction brings your 15% margin down to 12%, or a 3% cut.

Worse, the 7% cut applies to all income over $388,350, which, if you make tens of millions of dollars a year, is almost all of that. But if you make less than $35,350, then your first $8700 only gets a 2% cut, and the remaining $26,650 gets a 3% cut.

So, which is bigger: a 7% cut on millions of dollars, or a 3% cut on tens of thousands of dollars? Let me get out my calculator….

Loosely speaking, someone making $10 million in regular income stands to gain close to $700,000, while someone making $40,000 will get less than $1000.

But that’s not all. Romney would cut corporate tax levels from 35% to 25%, a reduction of 29%; most of that money would go to rich people. He would eliminate—cut to zero—the capital gains tax, which is a primary source of income for many rich people. Many who are wealthy are actually capable of designing their income (e.g., choosing stock options instead of salary) so it is more capital gains than not. In addition, he would eliminate the estate tax, which currently only taxes inheritance income beyond $5 million.

All three of these are tax breaks for the wealthy, and all are even bigger than the additional 20% cut on normal income that Romney would also give to rich people. And they keep the Bush tax cuts. And they get the ACA taxes cut.

All of which means that the tax rate for someone making tens of millions of dollars could fall to zero. Making the elimination of deductions meaningless. Remember that Romney paid 14%; he did that in large part due to the 15% capital gains tax, which would drop to zero under his plan. Romney would pay almost nothing in taxes.

In the meantime, if you earn $40,000 a year, Romney’s break could save you $935.

But if your name is Mitt Romney, you could save millions. And if your name is Hilton, or Walton, or Koch, you could save billions.

Now, Romney says he’ll cut deductions and loopholes to pay for it. The problem is, he won’t say which ones. The only thing he has said is that he won’t cut middle class deductions, or at least not anything significant.

The problem is, the math doesn’t work out. That now-famous Tax Policy Center study crunched the numbers, and even assuming the most favorable outcome—that Romney really does intend to get rid of every tax loophole for the rich—he would still have to cut into middle-class deductions to the tune of $2400.

Romney can’t have it both ways. Either his first-year tax plan will increase the deficit by hundreds of billions of dollars a year for the next decade, or he will have to hike taxes on middle class families up to more than double what they save from his tax cuts.

And the poor, by the way, get nothing. Romney is true to his word, he is not paying any attention to the 47% at the bottom. Oh, they’d stop getting food stamps. Because we can afford to cut taxes for billionaires to virtually zero, but we can’t afford to buy milk or bread for starving people.

After all, Romney was quite clear: they are victims. He wasn’t kidding.

Categories: Election 2012, Right-Wing Lies, Taxes Tags:

Is Government Necessary?

August 12th, 2012 13 comments

Part of an analysis of Obama’s “You Didn’t Build That” false controversy:

Jefferson, whom Democrats claim as the progenitor of their party and whom they celebrate with annual “Jefferson-Jackson Dinners,” was perfectly clear. The people of the United States created the government for one purpose only: to secure their rights. That is, the people, their possessions and their God-given rights existed prior to the state, which the people created to serve them.

With his Roanoke speech, Obama turned Jefferson on his head. In Obama’s formulation, government is not a tool for the people’s use, but the very foundation upon which all of American prosperity is built. Government is not dependent upon the people; the people are dependent upon the government.

Aside from the question of whether the author’s interpretations of the founders’ intentions are correct, the real question here is, can we say that Obama’s analysis is true? Do we depend on the government for being who we are?

The answer is easy: of course we do. I am tempted to add the biting comment, “Duh.”

We would be a completely different nation had we followed limited intentions as to the role of government. The fact is, we have grown, evolved, and become much more than was first established or envisioned. Had we not, we would not be the world power we are today, and we would not have the society we have today.

Historical romanticism is good and all, but you cannot base modern governance upon an ideal of returning to the principles of the role of government which may or may not have been an intended ultimate limit back when we were a fledgling agrarian society in a completely different age where human rights were delegated to a privileged few.

We should also not be fooled by the idea that this is about principles. Those espousing severe cutbacks in government programs are not doing so out of love for historical virtue. It is a more visceral reaction based upon avarice and bias. All the good that government does and has done is either dismissed, taken for granted, or subsumed into accomplishments by agents other than government. The cries for cutbacks come primarily from a desire to funnel money to the sector from which the cries originate while cutting as much as possible the burden of those doing the crying.

As a result, we see not so much reason and support as we do rewriting and obfuscation.

The writer of the article does essentially that. He first dismisses Obama’s idea that the middle class owes much of its existence to the the federal government by throwing up the straw man that Obama’s argument rests upon the supposition that the “middle class” at the time of the revolution would have to have been created, or allowed to form, by King George. Then he dismisses the entire argument about infrastructure by bizarrely arguing that this was the people acting, and not the government acting, defining the difference as being that the American people had tight control over how far the government would go in such endeavors. In short, the key to his argument seems to be based upon redefining things so that he’s right.

This has nothing to do with the argument being made publicly today, including the response to Obama’s statement: that government should not be, nor should ever have been as big as it is or as involved in advancing the general welfare of our nation. Building the nation should be up to private enterprise, as should health care, pensions, schools, security, and most everything else. And if you build a business, it’s all you and the government never did anything to help you–instead it only hindered you. Because we all know that government can never actually create any jobs, and when it tries to help, only horrific disaster ensues.

The question, then, goes back to that fundamental idea which the writer proposed, or more specifically, to the idea being forwarded by conservatives today: that the sole purpose of government is “to secure our rights” and anything beyond that is irrelevant to our achievements, or has actually held us back.

To consider this, you have to ask, exactly how does government secure our rights?

In the minimalist sense, government should do nothing more than is absolutely necessary to see that our rights are preserved. This would require a very small government, defending our borders and doing minimal policing inside them. No foreign wars would be prosecuted; no special services or assistance would be rendered to the people; no involvement in the economy would be performed. The government would make sure we’re not molested from without and do the bare minimum to preserve order within, and otherwise try to be as invisible as possible to the people. No huge projects, no safety nets, no redistribution of wealth. No trying to make the people better, just maintain the status quo and leave the rest up to society without the government sticking its nose in. No forced integration, no affirmative action, no government condoning of things like gay marriage.

Think over our history and how this would have affected our development as a country. Would we be who we are today without that?

Hell, no. We’d be a completely different society, and not a better one. We’d still be capitalist, but with income inequality even more severe than it is now. We would have become a plutocracy far beyond what we see today, with a manufacturing economy spreading from the north based on slave wages, and an agrarian economy from the south based on slave labor. Slavery would have lasted far longer, perhaps even into the present, with civil rights probably still only a dream. Public education would have been for-pay and only for those with wealth, as would be any kind of substantial medical care.

Despite being wealth- and production-centered, American industry and business would not have grown as it did. There would have been no government push for infrastructure. The rail system would have been minimal, interstate highways never built. Electrical systems would not have grown beyond sparse usage. Everything that our government has spent a great deal of money on in terms of infrastructure would have only been built as far as it was economically viable for private business–in short, not nearly as comprehensively as we have today. This would have saved money for businesses in the short run, but stunted their growth terribly in the long run. Computer technology was primarily funded by government spending, even as far back as the 19th century; that industry would have been greatly delayed, and infrastructure like the Internet never built. Ironically, it has not been the people bleeding the rich and the businesses for welfare checks, it has been industry calling for taxpayer money to build infrastructure too expensive for them to build themselves.

The author of the article suggests otherwise, and the argument could be made that building a national infrastructure is vital to preserving the rights of the people. (Ironically, these same conservatives are trying to stop infrastructure spending.) The problem with that argument is that if you take the idea of “preserving the rights of the people” as far as doing things like building infrastructure (acting positively to improve the society the people live in) then you essentially have the government we have today–in fact, you actually have a far more socialist government than we have today. How is providing financial security and good health to the populace not preserving their rights while building an infrastructure is? Really what the author is saying is, “We’ll stick to the absolutist principle except for stuff we like.” Sorry, but no–this is a situation where you cannot be “a little bit pregnant.” Either government works to preserve the rights of the people actively, or it doesn’t. Anything else is not principle, but instead is cherry-picking. Either we stick to the barest principles of the founders or we expand beyond it. You can’t establish a principle and then pick and choose when to violate it and still say the principle is sacrosanct to suit your needs. Sticking to the principle would have meant no government building of infrastructure, instead leaving it to private industry. And the fact is, we have decided as a society to act in the people’s interest.

Minimalists would have furthermore only protected imminent threats to our borders, but would not have participated in conflicts overseas. Even the Monroe Doctrine might not have passed. America would not have expanded its influence overseas, and would have sat out the first two world wars, figuring that we were not threatened because it would be too costly for European and Asian powers to bring war to American shores. America would never have become a world leader, and its ability to extend trade beyond its own shores would be in grave doubt.

I could go on, but you get the idea. All of this and far, far more serves as the foundation for the America we all know and want to have. It is all based on a strong central government which has grown well beyond simply minimally maintaining the rights of citizens–something which, when the Constitution was drafted, was limited mostly to wealthy white male land owners in any case.

What the government became, and what conservatives are trying to deconstruct, is a government which acts as an advocate for the people. If industry pollutes, the government stops them from harming the people. If a group is deprived of its rights by a bigoted majority, the government protects the rights of the people, not the ability of the majority to persecute. If the people are forced through desperate poverty to work for ruinous wages in harmful conditions, the government becomes their advocates. But the government does more than just that; it has tried to create a society where, as in a family, no one gets left behind to die in the street. It intervenes so the elderly are not forced to sleep under bridges in winter because some rich bastard stole their pension funds; so the poor are not made to starve in a land of plenty; so people can expect decent medical care without having to pay a king’s ransom because an industry holds their very lives as hostage.

Conservatives hate this. To them, it means that they are paying money for some freeloading bum to live in the lap of luxury with washing machines and big-screen TVs. They see a stark dichotomy with them doing all the work and making all the progress while half the nation sits on their ass without paying a dime in taxes, smoking dope and buying booze with food stamps, acting as parasites on the teat of big government. Reagan’s mythical welfare queen, now on steroids and writ large across an entire class.

Conservatives hate this straw-man moocher. You heard the crowds at the debates, not cheering, but shouting in outraged triumph at the idea of letting a poor schmuck die cold and alone in the streets instead of making them participate in paying for health care that would save the man’s life. You heard the crowds bused in to disrupt town hall meetings: I’ve got my Medicare, don’t you dare tax me to pay for health care for the poor. This is what they mean when they say they want “their country back.” It is what this all really comes down to: not a return to the founders’ glorious principles, but instead, “I want the benefits of government for me, not for those other bums.” Its just like the vote-suppression movements: “this country is for me; I deserve it and you’re a no-good parasite; you can go to hell!” They see others as being selfish when in fact it is them.

Obama was perfectly correct, and those who think government should never have grown beyond its infancy are indulging in a pipe dream. We are, in fact, not just dependent on each other within our own borders, we are dependent upon the world as a whole. Contrary to the fantasy world some libertarians dream of, you cannot have even a fraction of the wealth and prosperity we have enjoyed without also requiring exactly the things that these people wish never existed. Anyone who thinks they built a business and did it “completely” on their own is sadly and selfishly mistaken. Anyone who believes they would be better off without government is a fool.

The fact is, were the “drownable in a bathtub” government to exist, these people would not have a fraction of the things they presume have appeared because of their own individual efforts or the independent might of free markets. They are prosperous and believe they owe no one else for that prosperity.

Reality is very much distant from that presumption.

To Spite One’s Face

September 22nd, 2011 2 comments

It’s about time that we started publicly tearing down the asinine idea that raising taxes on wealthy people will be a drag on the economy, based on the idea that people who are taxed more will be less productive. Frankly, that’s a steaming, heaping pile of nonsense.

The basic premise behind it is that the more you tax people, the less they will be willing to work. For example, if someone makes ten million dollars a year, and you raise his tax rate from (let’s imagine that anyone really pays the marginal rate) 35% to 45%, meaning that (again, fantasizing that there are no breaks or shelters and that every dollar of income is taxed that much) his take-home drops from $6.5 million to $5.5 million, then this hypothetical person, seeing a million dollars vanish, will feel less like working. His productivity will fall, and as a result, the government will take in less in taxes overall, and the economy will slow from all the people like him making similar decisions, and no one will want to pick up the slack.

This is about the stupidest thing I have ever heard, right up there with the Laffer curve. Yes, if you raise his total tax burden to an absolute 95% (no loopholes, breaks, or shelters) if he makes $10 million, and lower it to 10% if he makes half a million, then yes, probably you’ll find people who will draw down and go for the lesser amount. But only with such extremes, and only in such stark terms, without room to maneuver. However, those extremes do not and will not exist. The top marginal rate of 35% kicks in at just under $380,000, and the 33% rate at just under $175,000 (for someone filing as single). The savings in terms of total percent are gradual until you get to the bottom of the 25% bracket at just under $35,000. What this means is that there are no huge savings for a wealthy person in lowering their income, and will not be unless the tax brackets are very poorly designed indeed.

If a wealthy person now facing a 35% marginal rate sees that rate raised by 10%, or even 20% or 30% more, they are not going to scale back the amount they work and try to earn. Not unless they have some bizarre, neurotic impulse to shoot themselves in the foot out of resentment over being, in their opinion, taxed too much. Many will feel over-taxed, but few if any will see that as reason enough to stop trying to make money. Quite the contrary, in fact–it is far more likely that such a person would actually increase their efforts, as most such people aim at achieving specific levels of wealth, achievement, or overall success, and not at just slightly more advantageous relative rates of take-home pay. This would make no sense in the real world. A CEO who declared he’d scale back his work hours and not perform as well for the company because his top marginal rate rose from 35% to 40% would probably be fired, and rightly so.

A Randian thinker, however, might suggest that “productive” people (because people who do back-breaking labor at minimum wage are not the productive ones, I suppose) would go on strike in protest to such horrific tax rates. This, of course, is stupid piled on stupid. If there are two scabs waiting to pick up the work of every menial laborer, then there are a hundred hungry businessmen with no sense of class solidarity whatsoever who are just salivating to get the chance to fill in the void that would be left by a businessman idiotic enough to throw in the towel. If there are people in Southeast Asia willing to do the same factory work as Americans for a tenth of the pay, then there are a hundred times more eager entrepreneurs who would give anything to take home 55% of several million dollars per year.

This stream of replacements wanting to make money off of a business venture would not dry up even in the extreme 95%-absolute-rate fantasy. Think about it: there are people who work 80 hours a week scrubbing floors for minimum wage. Do you think such a person would back away from a chance to bring home half a million dollars out of an income of $10 million, working the same hours but in a business suit in a nice, clean office? And don’t tell me that you won’t find hungry, creative, productive people in large supply; productive people are clobbered every day in business by simple competition; lessen that competition and they will emerge.

No, no businessman will call it quits because of higher tax rates unless they had achieved their goal and sated their desire for wealth already, and if such rare people were to retire, there would be no end to other people–creative, productive people–who would immediately pick up the slack.

The Small-Businessman Sham

September 21st, 2010 1 comment

There they go again.

Republicans are, once again, trotting out the Democrats-are-going-to-devastate-small-business lie. Of course, they do this all the time. And it’s the same every time any issue comes up affecting wealthy corporations: the GOP wants to protect their patrons, but knows that it doesn’t look so good if they come out and say so too much. So they do what they always do, what they have done for a long time now: they trot out the “small business” owner, claim that their tax cut or whatever is going to help people like this, or that the Democratic initiative is going to hurt them somehow. And the claim is always false; when it comes down to it, the Republicans are just as liable to kill something that’s good for small business if it suits them, or to put down small businessmen if the situation calls for it.

Just two months ago, Democrats proposed $30 billion in tax cuts aimed directly at small businesses; Republicans tried to kill it. Naturally. Because they’re the champions of small businesses, right?

Or take the case of the little kid who spoke up for the S-CHIP health program, who the right-wingers savaged in an attempt to claim the program did not actually help people in financial trouble. They blasted the Frost family for not deserving help because, among other things, the family ran… you guessed it, a small business. If they’re swimming in that kind of small-business dough, they reasoned, you shouldn’t ask the government to help you out.

So when it comes down to it, they will just as easily slam the small businessman. But when it comes to passing something for Big Business, for the rich–repeal the estate tax, extend Bush’s tax cuts for the wealthy, or stop another minimum wage hike–they always trot out the small businessman and say “we’re doing it for them!”

Bullshit must be called.

The GOP has been hitting the small-business meme again about Obama’s plan to uphold the Republican-authored law not to extend tax cuts for people making over $250,000, thus increasing the tax on income made over that amount by a few percent. (Sounds devastating when put in honest terms, doesn’t it!) “That’s 750,000 to 800,000 small businesses!” Orrin Hatch exclaimed; “That create most of the jobs in our society!” Boehner’s office released a statement which said, “The bottom line is that Washington Democrats’ tax hike would hit 750,000 small businesses across the U.S., which constitute 25 percent of our small business workforce.” But a large number of those “small businesses” they refer to are either “pass-through” businesses–large, billion-dollar firms who hide their incomes with a tax dodge where they claim it via individuals working for them–or are “small” businesses with huge receipts, nearly 20,000 of them with receipts over $50 million.

Only 1.9% of actual small business filers report income over the $250,000 level. Most of them will pay only a few hundred bucks more in taxes, at most. The ones who will get taxed more than that are more than wealthy enough to afford it.

No, “small businesses” will be just fine. The GOP is not trying to protect them. The GOP tried to kill $30 billion in tax cuts for them. The GOP is interested in only one thing: protecting people who are a lot wealthier than mere small businessmen.

I have noted this “small-business” sham many times in the past–because Republicans use it so often. Just a few months ago, I wrote:

They don’t give a flying frack about small businesses. They use small businesses as a front whenever they want to give something excessive to the rich, saying that if they don’t get what they want, small businesses will suffer. Similarly, if Democrats want to do something they don’t like, such as raising the minimum wage or strengthening regulations–even when small businesses are made exempt–Republicans trot out small business owners and try to claim they will be hammered by those nasty Democrats and their anti-regular-American-small-businessman ways.

Whenever you hear a right-winger say anything about “small businesses,” let that be a red flag, make it set off your BS detector, and look closely–you’ll almost certainly see a boon to rich people and corporations thinly disguised behind the suckered sap they have gulled up to the press conference podium to stand in as the face of small businessmen.

Just as I flagged it at the end of last year:

You know there’s a scam afoot when some big entity wants something enacted which will profit them handsomely, but holds up a sympathetic face as the “real” benefactor of the scheme. Wealthy people and corporations do this all the time through politicians–whenever there’s a tax cut for huge corporations, for example, the “small business owner” is always trotted out as the real reason the tax cut is being proposed. But in reality, small business owners end up getting reamed because the real benefactors, big business, become more engorged and able to crush the small business owners.

Just as I did three years ago, when I wrote about the minimum wage:

Their long-standing objection is that a minimum wage hike would hurt small businesses. Now, the term “small businesses,” when used by Republican politicians, should make a lot of flags go up. It is used by right-wingers as an excuse to defend big businesses, the huge corporations and industries that really stand to have their interests damaged. It’s a natural political maneuver; after all, one cannot garner much sympathy by saying that something will make a dent in the huge profits of giant corporations. No one would give a damn. So the small businessman is trotted out to say how he’ll be devastated by whatever new proposal is being opposed. Or he’ll be shoved in front of the cameras to talk about how this new tax cut for the rich will let him keep his business afloat, which would otherwise fall into bankruptcy.

And five years ago, when I wrote about the attempt to kill the Estate tax:

House Republicans passed a repeal of the Estate Tax, with Senate Republicans primed to sweep the bill through just as unanimously among their brethren. Of course, they posit the bill as being aimed at small businesses and small farmers, but we all know that this is utter bullshit: only a few hundred such entities are effected by the tax each year. [...] And despite their claimed concern for small businesses and farmers, they did not take the plainly obvious route of exempting just small businesses and farmers. The reason, of course, is obvious: this is not a tax cut for small businesses and farmers. It’s a tax bill for (surprise!) the super-wealthy. The Walton family, for instance, were big Bush and GOP contributors, and they have been pushing relentlessly for the tax cut. By themselves, they will save tens of billions of dollars on top of the many tens of billions they will already get. This is the “small business” that the bill is truly aimed at.

It is commonly pointed out that Democrats get money from the wealthy as well, and vote to protect the interests of big corporations as well. This is true–but only to an extent. Democrats will vote for specific wealthy interests, some of the time–but when it comes to protecting the middle class, the poor, the little guy, the small business, why is it that it’s the Democrats doing this almost all of the time, with the GOP rallied to oppose them, again almost all of the time? And when it comes to cutting taxes for the rich and cutting breaks for big business already making obscene profits, why is it only ever opposed by Democrats?